Sudan s Infrastructure: A Continental Perspective

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized COUNTRY REPORT Sudan s Infrastructure: A Continental Perspective Rupa Ranganathan and Cecilia Briceño-Garmendia JUNE 2011

2 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC USA Telephone: Internet: feedback@worldbank.org All rights reserved A publication of the World Bank. The World Bank 1818 H Street, NW Washington, DC USA The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Executive Directors of the International Bank for Reconstruction and Development / The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA USA; telephone: ; fax: ; Internet: All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street, NW, Washington, DC USA; fax: ; pubrights@worldbank.org.

3 About AICD and its country reports This study is a product of the Africa Infrastructure Country Diagnostic (AICD), a project designed to expand the world s knowledge of physical infrastructure in Africa. AICD provides a baseline against which future improvements in infrastructure services can be measured, making it possible to monitor the results achieved from donor support. It also offers a solid empirical foundation for prioritizing investments and designing policy reforms in Africa s infrastructure sectors. The AICD is based on an unprecedented effort to collect detailed economic and technical data on African infrastructure. The project has produced a series of original reports on public expenditure, spending needs, and sector performance in each of the main infrastructure sectors, including energy, information and communication technologies, irrigation, transport, and water and sanitation. Africa s Infrastructure A Time for Transformation, published by the World Bank and the Agence Française de Développement in November 2009, synthesized the most significant findings of those reports. The focus of the AICD country reports is on benchmarking sector performance and quantifying the main financing and efficiency gaps at the country level. These reports are particularly relevant to national policy makers and development partners working on specific countries. The AICD was commissioned by the Infrastructure Consortium for Africa following the 2005 G8 (Group of Eight) summit at Gleneagles, Scotland, which flagged the importance of scaling up donor finance for infrastructure in support of Africa s development. The AICD s first phase focused on 24 countries that together account for 85 percent of the gross domestic product, population, and infrastructure aid flows of Sub-Saharan Africa. The countries are: Benin, Burkina Faso, Cape Verde, Cameroon, Chad, Côte d'ivoire, the Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, South Africa, Sudan, Tanzania, Uganda, and Zambia. Under a second phase of the project, coverage was expanded to include as many of the remaining African countries as possible. Consistent with the genesis of the project, the main focus is on the 48 countries south of the Sahara that face the most severe infrastructure challenges. Some components of the study also cover North African countries so as to provide a broader point of reference. Unless otherwise stated, therefore, the term Africa is used throughout this report as a shorthand for Sub-Saharan Africa. The World Bank has implemented the AICD with the guidance of a steering committee that represents the African Union, the New Partnership for Africa s Development (NEPAD), Africa s regional economic

4 communities, the African Development Bank (AfDB), the Development Bank of Southern Africa (DBSA), and major infrastructure donors. Financing for the AICD is provided by a multidonor trust fund to which the main contributors are the United Kingdom s Department for International Development (DFID), the Public Private Infrastructure Advisory Facility (PPIAF), Agence Française de Développement (AFD), the European Commission, and Germany s Entwicklungsbank (KfW). A group of distinguished peer reviewers from policy-making and academic circles in Africa and beyond reviewed all of the major outputs of the study to ensure the technical quality of the work. The Sub-Saharan Africa Transport Policy Program and the Water and Sanitation Program provided technical support on data collection and analysis pertaining to their respective sectors. The data underlying the AICD s reports, as well as the reports themselves, are available to the public through an interactive Web site, that allows users to download customized data reports and perform various simulations. Many AICD outputs will appear in the World Bank s Policy Research Working Papers series. Inquiries concerning the availability of data sets should be directed to the volume editors at the World Bank in Washington, DC.

5 Contents List of figures List of tables Acknowledgments Synopsis The continental perspective Why infrastructure matters The state of Sudan s infrastructure Transport Roads Ports Air transport Water supply and sanitation Energy Information and communication technology Financing Sudan s infrastructure How much more can be done within the existing resource envelope? Annual funding gap What else can be done? Bibliography and references General Financing Growth Information and communication technologies Irrigation Power Transport Water supply and sanitation Other iii iv v List of figures Figure 1a. Infrastructure s historic contribution to economic growth, vs Figure 1b. Infrastructure s potential future contribution to economic growth Figure 2. The demography, topography, and natural resources of all parts of Sudan Figure 3. Development of the regional infrastructure backbone and national backbones in Sudan Figure 4. National and regional transport network in all parts of Sudan Figure 5. Transport poses an obstacle to business in some areas of Sudan Figure 6. Moving freight within Sudan vs. moving imports from Durban to Lusaka Figure 7. Expense of moving freight within Sudan and across southern Africa Figure 8. Road quality in Sudan Figure 9. Road traffic in Sudan Figure 10. Port Sudan faces serious congestion problems Figure 11. Khartoum is the main airport in Sudan iii

6 Figure 12. Evolution of seats and city pairs in Sudan Figure 13. Water resources in Sudan Figure 14. Limited access to advanced water technologies in urban Sudan Figure 15. Sanitation access is largely bimodal Figure 16. Hidden costs of selected water utilities, as percentage of revenue Figure 17. Power infrastructure in Sudan Figure 18a. Electricity is the largest obstacle to doing business in Sudan Figure 18b. High reliance on generators for power Figure 19. A small share of Sudan s power consumption is for industrial activities Figure 20. Moderate power tariffs in Sudan Figure 21. Benchmarking historic power production costs in Sudan Figure 22. Large hidden costs at the NEC due to underpricing and unaccounted losses Figure 23. Hidden costs are high in Sudan relative to other African countries Figure 24. Existing tariffs for power are insufficient to recover huge operating costs and long-run marginal costs Figure 25. Sudan s ICT backbone infrastructure as of the mid-2000s Figure 26. A small subsidy could have closed the mobile telephony coverage gap in all parts of Sudan Figure 27. The voice telephony gap could easily have been filled in Sudan Figure 28. Sudan s infrastructure spending needs in the regional context, as share of GDP Figure 29. Sudan s current infrastructure spending is average by African standards Figure 30. Sudan s pattern of capital investment in infrastructure and that of comparator countries Figure 31. Underpricing of power and water in Sudan Figure 32. The burden of inefficiency in Sudan s power and water utilities Figure 33. Many African countries capture more private investment than Sudan List of tables Table 1. Achievements and challenges in Sudan s infrastructure sectors Table 2. Benchmarking Sudan s national network against African aggregates for regional corridors Table 3. Time and costs associated with transport within Sudan Table 4. Benchmarking the performance of Sudan s roads Table 5a. Land area in Sudan with high agricultural suitability Table 5b. Distribution of agricultural value within Sudan Table 6. Sudan s spending needs for regional, national, rural, and urban connectivity Table 7. Benchmarking Port Sudan s performance Table 8. Benchmarking air transport indicators for Sudan and select other countries Table 9. Origin destination matrix Sudan Table 10. Benchmarking water and sanitation indicators in Sudan Table 11. Operational indicators for water utilities in Sudan, 2005 Table 12. Relatively high usage of modern fuels for cooking in Sudan Table 13. Benchmarking power indicators in Sudan Table 14. Operational indicators for the NEC Table 15. All parts of Sudan compare favorably to the average African country in terms of ICT access and prices Table 16. Prices of Internet and phone calls in Sub-Saharan Africa, with and without access to submarine cables Table 17. Illustrative investment targets for infrastructure in Sudan Table 18. Indicative infrastructure spending needs in Sudan, Table 19. Financial flows to Sudan s infrastructure, average 2001 to 2005 Table 20. Identified infrastructure projects financed by non-oecd financiers Table 21. Sudan s potential gains from greater operational efficiency Table 22. Funding gaps by sector Table 23. Savings from innovation iv

7 Acknowledgments This paper draws on contributions from sector specialists from the Africa Infrastructure Country Diagnostic Team; notably, Heinrich Bofinger on air transport, Alberto Nogales on roads, Carolina Dominguez on water, Michael Minges on information and communication technologies, Nataliya Pushak on public expenditure, and Alvaro Federico Barra on spatial analysis. The paper benefitted from substantial comments and guidance from Vivien Foster. The paper is based on information provided from colleagues in the Sudan country team: notably, Greg Toulmin (country program coordinator), William G. Battaile (senior country economist), Yutaka Yoshino (corridors), Justin Runji (transport), Tesfaye Bekalu (water), Tesfamichael Nahusenay (transport), and Riahan Elahi (power). v

8 Synopsis Improvements in infrastructure in all parts of Sudan in recent years have had a strong impact on per capita growth, contributing 1.7 percentage points. Consistent with trends in other countries, the information and communication (ICT) revolution that swept Africa contributed the most to Sudan. Raising the infrastructure endowment of all parts of Sudan to that of the region s best performer, Mauritius, could boost annual growth by about 3.5 percentage points. Sudan has invested heavily in infrastructure in recent years, with some notable achievements. Power generation capacity tripled in just a few years, rising from around 800 megawatts (MW) in 2005 to 2,687 MW in 2007, with a shift toward hydropower. Nevertheless, service reliability remains an issue. In ICT, Sudan has made enormous strides in liberalizing the sector and as a result has attracted significant private capital. Mobile penetration soared from less than 1 percent in 2000 to 33 percent in Recent connectivity to an undersea fiber-optic cable has led to expansions in access, improvements in quality, and reduction in prices. Looking ahead, Sudan s most pressing infrastructure challenges lie in the water and transport sectors. Most of Sudan lacks access to safe sources of water. Access to sanitation is bimodal, where 40 percent of the population uses improved sanitation technologies and around 40 percent defecates in the open. Access challenges have been compounded by large inefficiencies at the water utilities. Inadequate collection of revenues, large distributional losses, and to some extent inability to recover costs have diverted over $120 million in revenues each year. In the transport sector, even though the road network almost doubled in length to 6,200 kilometers (km) between 2000 and 2008, a sizable share of the country lacks roads. There are a few well-developed internal corridors, but rural connectivity is almost nonexistent. Road density is exceedingly low and traffic along most roads is sparse. Poor-quality roads drastically undermine the efficiency of transport services. Further, the large volumes of unpaved roads make movement impossible during the rainy season. Sudan s infrastructure development has so far had a national focus, and there is much that remains to be done to achieve greater regional integration. While internal road corridors are developed, connectivity with neighbors is largely absent. Sudan has a natural gateway to the sea through Port Sudan but the port s performance is severely hindered by long dwell times, high costs, and capacity constraints. Looking further ahead, Sudan has the potential to be a major hydropower exporter if additional capacity could be developed and transmission links with neighboring Nile Basin countries strengthened. Addressing Sudan s infrastructure challenges will require sustained expenditure of almost $4.2 billion per year over the next decade, mainly for capital investments. In terms of the size of the economy that level of infrastructure needs is equivalent to just over 20 percent of gross domestic product (GDP). Not unthinkable of, as it is comparable to the 15 percent of GDP China has been investing in recent years on infrastructure. Yet, it is an ambitious target for Sudan as it would represent almost tripling the recently observed annual average of infrastructure spending (about 7 percent of GDP). Water and transport account for 80 percent of the spending needs.

9 Sudan already spends approximately $1.5 billion per year on infrastructure, equivalent to about 6 percent of its GDP. Two-thirds of Sudan s spending consists of investment, with Chinese funds accounting for 40 percent of investment finance. Private investment in Sudanese infrastructure is also significant, at 23 percent of the total, while official development assistance (ODA) is negligible. In contrast to its peers, Sudan s capital spending on infrastructure is strongly skewed toward the power sector. A further $580 million a year (equivalent to 2.7 percent of GDP) is wasted due to inefficiencies, largely due to mispricing of power. Over 80 percent of these inefficiencies derive from the power sector. Electricity is currently priced at 50 percent of its cost-recovery threshold, leading to losses worth $378 million annually. The mispricing of power results in inefficiencies on the order of $380 million for the utility, while distribution losses are worth $106 million annually. Sudan s annual infrastructure funding gap is $2.9 billion per year, equivalent to almost 14 percent of its GDP. Most of the funding gap is associated with the water and transport sectors, each of which is more than $1 billion short of resources. But these gaps could each be reduced by half by judicious choice of lower-cost technologies for water and sanitation services and road surfacing. No funding gap is found for power, due to the relatively high level of spending in recent years and the magnitude of inefficiencies that could be captured to bolster sector finances. To bridge the funding gap, Sudan could build on its existing success in capturing infrastructure finance both from China and the private sector. Sudan has done quite well in attracting about 1 percent of GDP in private investment for infrastructure; but a number of other African peers have done even better, capturing two to three times as much in proportional terms. Nevertheless, the largest funding gaps in transport and water may be less amenable to private finance. One option would be for Sudan to draw increasingly on its Chinese and Arab partners to support transport and water investments, and allow the private sector to play a larger role in the power sector, where it has not been active to date. Nevertheless, the funding gap remains substantial relative to the Sudanese economy. The continental perspective The Africa Infrastructure Country Diagnostic (AICD) has gathered and analyzed extensive data on infrastructure in more than 40 Sub-Saharan countries, including Sudan. The results have been presented in reports covering different areas of infrastructure ICT, irrigation, power, transport, and water and sanitation and different policy areas, including investment needs, fiscal costs, and sector performance. This report presents the key AICD findings for Sudan, allowing the country s infrastructure situation to be benchmarked against that of its African peers. Sudan is a relatively well-off low-income state richly endowed with oil; therefore, both low-income and resource-rich benchmarks will be used to evaluate its performance. Detailed comparisons will also be made with immediate regional neighbors in the East African Community (EAC) and with countries in North Africa in some cases. Several methodological issues should be borne in mind. First, because of the cross-country nature of data collection, a time lag is inevitable. The period covered by the AICD runs from 2001 to Most technical data presented are for (or the most recent year available), while financial data are 2

10 typically averaged over the available period to smooth out the effect of short-term fluctuations. Second, to make comparisons across countries, the indicators and analysis were standardized so that everything was done on a consistent basis. This means that some of the indicators presented here may be slightly different from those that are routinely reported and discussed at the country level. Third, in terms of nomenclature, all parts of Sudan refers to Sudan prior to the split of the country, Sudan refers to the northern part of Sudan, and South Sudan is the newly independent country. Fourth, data for Sudan and South Sudan were originally collected and processed for the country as a whole, that is, all parts of Sudan. But given recent geopolitical events, including the seceding of South Sudan from the rest of the country, and the vast differences between Sudan and South Sudan in terms of topography, infrastructure, and financial resources, this report presents analyses and results that reflect the situation in Sudan as much as possible. In a few cases, this involves relying on imperfect data and using proxy variables to attribute otherwise global estimates. Why infrastructure matters The recent schism of all parts of Sudan into Sudan and South Sudan will have massive impacts on the Sudanese economy. For one, the splitting of oil assets that are mostly in South Sudan will impact Sudan s overall resource revenues in the coming years. The economy for all parts of Sudan grew at the rate of 6 percent per capita between 2003 and Its growth was more robust than that of several of its East African peers, who grew at 4 percent per capita during the same period. 1 The advent of an oil-based economy in Sudan was the harbinger of robust growth between 2000 and Oil constituted around 90 percent of Sudanese exports and was driven by oil production in South Sudan. Oil resources enabled the government to roll out new physical and social infrastructure, focused primarily on the northern part of the country. There was an increase in the volume of transportation between Khartoum, where economic activity has been concentrated, and Port Sudan, the coastal gateway for imports and exports. Empirical evidence linking infrastructure to recent economic growth patterns documents how the allocation of oil wealth to infrastructure development has impacted the economy. Between the 1990s and early 2000s, all parts of Sudan reaped large growth benefits in infrastructure development. Infrastructure contributed over 1.75 percentage points to all parts of Sudan s per capita growth (figure 1a). The ICT sector made the strongest impact on growth. The road and power sectors made modest contributions in contrast to other countries, where inadequate power infrastructure had a negative effect on growth. Since most of the improvements in the ICT sector were recorded in Sudan and very little in South Sudan, it is reasonable to expect that the largest gains in growth came through contributions from the ICT sector in Sudan. 1 The growth represented is based on GDP per capita (constant 2000$). The East African peers are Burundi, Ethiopia, Djibouti, Kenya, Rwanda, Tanzania, and Uganda. 3

11 Figure 1a. Infrastructure s historic contribution to economic growth, vs Congo, Rep Kenya East Africa Cameroon Cote d'ivoire Tanzania Uganda Sudan Source: Calderón Note: ICT = information and communication technology. Infrastructure could contribute more to all parts of Sudan s infrastructure in the future than it has in the past (figure 1b). Simulations suggest that if Sudan s infrastructure were to be upgraded to the level of the best-performing country in Africa (Mauritius), the impact on per capita economic growth would be on the order of 3.5 percentage points. While all areas of infrastructure ICT, power, and transport need to be upgraded, improvements in roads can impact growth the most by around 1.5 percent. Improvements in power infrastructure will add another 1 percent to per capita growth. Infrastructure s immediate potential contribution to growth is less than it is in several other East African countries. Figure 1b. Infrastructure s potential future contribution to economic growth Potential contributions of per capita growth Cote d'ivoire Kenya Cameroon Tanzania Sudan Congo, Rep of Uganda East Africa ICT Power Roads Source: Calderón Note: ICT = information and communication technology. 4

12 The state of Sudan s infrastructure The spatial distribution of Sudan s economy shows a sparse population with pockets of economic activity around a few urban centers. There is a heavier concentration of activity and population along the Nile (figure 2a). The topography of Sudan is divided into three regions the deserts, the semi-arid Sahel region, and the wetlands and rain forests. The deserts in the north the Nubian Desert to the east of the Nile, the Libyan Desert, and the rugged uplands to the northwest of the Nile comprise around 30 percent of the area of Sudan. Central Sudan is characterized by the semi-arid Sahel region of steppes and low mountains. Southern Sudan has vast wetlands in the upper Nile region that are among the largest in the world. The Nile spans a vast length of Sudan s territory. The tributaries of the Nile the White Nile and Blue Nile meet in Khartoum in the north. The White Nile crosses South Sudan from the Ugandan border, while the Blue Nile flows through east and central Sudan, irrigating a large part of the Sudanese land (figure 2b). Sudan is endowed with significant natural resource wealth in the form of metals and oil. There is one oilfield along the Red Sea in the north and another closer to the border of South Sudan (figure 2c). Figure 2. The demography, topography, and natural resources of all parts of Sudan a. Demography 5

13 b. Topography c. Natural resources Source: AICD. Note: The topography information is derived from 6

14 Road density in Sudan is among the lowest in Africa and the world. The existing road arteries are centered on Khartoum as the hub. One artery connects Khartoum with the coastal gateway of Port Sudan, a second connects Sudan with Egypt and North Africa, a third connects Khartoum with the Eritrean border, and a fourth leads to Ethiopia. Connections to South Sudan are fragmented; there is little traffic overall. In fact, along most of the networks, except between the Red Sea and Khartoum, traffic is sparse and road conditions patchy at best. Power infrastructure is developed only around select urban centers. A national grid is nonexistent, and there are no cross-border interconnectors. Power infrastructure is primarily focused on hydropower, with some thermal generation capacity. In recent years Sudan has benefitted from an increase in capacity, but there is an even greater hydropower potential that can be exploited (figure 3b). Sudan is naturally endowed to be a large producer and exporter of agricultural products. It is a riparian country, its fertile soil centered on the Nile, and areas of high suitability can be better exploited (figure 3c). The bright spot of Sudan s infrastructure is the ICT sector. ICT growth has accelerated and is comparable to regional averages. Mobile subscriptions have grown exponentially, and Sudan boasts of one of the most liberalized ICT markets in Africa, with a strong multinational presence. It is also relatively well endowed with fiber-optic connectivity to several undersea cables (figure 3d). This report begins by reviewing the main achievements and challenges of each of Sudan s major infrastructure sectors (table 1). Thereafter, attention will turn to the problem of how to finance the outstanding infrastructure needs. Figure 3. Development of the regional infrastructure backbone and national backbones in Sudan a. Roads in Sudan b. Power infrastructure in all parts of Sudan 7

15 c. ICT in all parts of Sudan d. Water in all parts of Sudan Source: AICD. Table 1. Achievements and challenges in Sudan s infrastructure sectors Sector Achievements Challenges Air transport Energy Information and communication technology (ICT) Strong international gateway in Sudan, with increasing traffic between Sudan and South Sudan. Per capita seats are higher than neighbors. Good connectivity with the Middle East, Europe, and Ethiopia. Strong increase in installed capacity in Sudan between 2005 and Increasing reliance on hydropower. High reliance on modern fuels for cooking. Moderate tariffs for power. Strong record in collection of bills. Impressive increase in mobile penetration across the country. Tariffs compare favorably with African peers. Sudan has among the most liberalized telecom markets in Africa. Established regional infrastructure backbone for ICT with connection to undersea fiberoptic cables. Ports Increase in traffic in Port Sudan. Port authority has generated significant revenues and has used these funds for port infrastructure upgrades. Port Sudan becoming a feeder port. Roads Increase in kilometers of road in the period Some good-quality roads connect major urban centers. Surface transport Water and sanitation Lower freight tariffs charges compared to several African peers because of a competitive trucking industry and lower petroleum prices. Internal corridors are relatively well developed. Source: Summary based on analysis presented in this report. Raising air safety standards; increasing government oversight in air transport. Increasing the volume, reliability, and quality of electricity supply; tackling underpricing of services in the power utility to achieve cost recovery; reducing large system losses. Expanding the Internet bandwidth from existing low levels; increasing the limited landline penetration. Reducing the long dwell times and truck cycle times at Port Sudan; tackling high handling charges at Port Sudan; minimizing port-congestion-related delays and challenges. Improving quality of roads; connecting rural areas with national road network; enhancing efficiency of transport services; raising institutional capacity in road sector. Enhancing road connectivity with neighbors; lowering high costs and long transit times associated with moving freight in and out of Sudan. Boosting access to improved water and sanitation sources; reducing open defecation and reliance on surface water; attaining cost recovery for the water utility; tackling large distributional losses for utilities and improving collection of bills. 8

16 Transport Figure 4. National and regional transport network in all parts of Sudan Source: AICD. Multimodal transport Sudan s transport infrastructure is unevenly developed. Despite a few road corridors, a large share of Sudan is unconnected or lacks paved roads. The networks consist of nearly 2,500 miles of single-track railroad with a feeder line (supplemented with limited river steamers) of about 1,200 miles of paved and gravel road primarily in greater Khartoum and Port Sudan. In addition some roads in the north-south direction have been built, as well as an oil pipeline Figure 5. Transport poses an obstacle to business in some areas of Sudan Transport is a major constraint (% firms) Source: World Bank 2009b. that is 840 miles long and runs from the oilfields in the Nuba Mountains and Khartoum to Port Sudan on the Red Sea Red Sea Khartoum River Nile Gezira North Kordofan Nyala 9

17 Around 22 percent of firms indicated that transport is a major obstacle to business activity, with challenges more acute in some areas than others. A sizable share of establishments in Sudan used their own transport facilities. The average share of own-transport use ranged from 35 percent of the total value of production-related transport activities within the country in Khartoum to 17 percent in North Kordofan. Nyala Red Sea (with 26 percent) and Gezira (with 25 percent) also registered a high rate of owntransport use. Transport in Nyala (Darfur region), meanwhile, was cited as a constraint on doing business by around 60 percent of the firms based there. The main internal corridors in Sudan are well developed and generally in good condition but do not extend to provide cross-border connectivity with neighbors (see figure 4). The trading artery in Sudan is the route that connects Kosti to Port Sudan via Khartoum. This road records the greatest traffic volumes in Sudan and boasts overall good-quality roads, particularly from Khartoum to Port Sudan. Another corridor connects Sudan to the Djibouti Corridor offering connectivity to the Port of Djibouti and Addis Ababa. While systematic data on these routes are not available, traffic volumes from Sudan along this corridor are expected to be very low, and the quality of roads range from fair to poor. Connectivity with South Sudan is practically nonexistent and was never a strategic priority. The regional corridor connecting to South Sudan is in bad condition and records very low traffic volumes. During the rainy season (April/May to October/November), a majority of the roads particularly in South Sudan are impenetrable. Sudan records average performance by African standards but poor performance when compared to global standards. Along some of the internal transport routes, surface transport moves at a pace that ranges from 8.5 kilometers per hour (kmph) 2 to over 13 kmph, 3 comparable to East Africa; in the parts less travelled and with poorer-quality roads, velocity is consistent with central African countries (table 2). Overall, freight in Sudan moves at the pace of a horse and buggy. Table 2. Benchmarking Sudan s national network against African aggregates for regional corridors Corridor Road in good condition (%) Implicit velocity (km per hour) Freight tariff (US cents per tonne-km) Western Central Eastern Southern Sudan South Sudan Source: Teravaninthorn and Raballand 2009; Nathan 2010; UNLJC and FAO 2005; Yoshino 2010; World Bank staff estimates Note: Estimates for Sudan based on routes from Khartoum to Kosti and Khartoum to Port Sudan. For South Sudan, costs are based on varying estimates for travel between Juba to Nimule. Implicit velocity is the total distance divided by the total time taken to make the trip, including time spent stationary at ports, border crossings, and other stops. Table 3. Time and costs associated with transport within Sudan Route Mode of transport Time (days) Implicit velocity Khartoum Road and river Malakal Khartoum Juba Road Road and river Road Source: AICD calculations based on data from Yoshino and others (2009), UNJLC and FAO (2005), and Keer- MISC (2007). 2 This is the estimated velocity of traffic between Khartoum to Kosti. 3 This is the estimated velocity of traffic between Khartoum and Port Sudan. 10

18 Poor road transport connectivity between Sudan and South Sudan requires the use of multimodal transport during half the year and is associated with lengthy transit times. Roads, particularly during the rainy season, are often unavailable. Relying on other forms of transport does not solve the problem: river transport services are not well developed, ports are inadequate, and commercial vessels are old. Freight that has to move via river takes six days longer than if it were to travel only by road (table 3). Services are limited between Juba and Kosti, and are used mainly for transporting goods arriving by train in Port Sudan. The cost of moving freight in Sudan is almost twice what it is on other continents, though it compares with the average for Africa. The average freight tariff between Khartoum and Port Sudan is about $0.08 per tonne-kilometer (tonne-km), and between Khartoum and Kosti is slightly higher, an average of $0.10 per tonne-km. These prices are comparable to that of East Africa but much higher than the global standard of around $0.04 per tonne-km. The middle-of-the-range costs of moving freight relative to the African average are driven by the competitiveness of the trucking industry and access to lower-priced petroleum. In Sudan the trucking industry appears competitive, with few barriers to entry. Growth in the trucking fleet was steady during : 10 percent annually for lorries, 20 percent for tank trucks, and over 40 percent for dry-cargo heavy trucks. Additionally, the trucking sector is not cartelized as it is in West and Central Africa. Absence of cartels keeps profit margins reasonable without significant markups. Further, the low cost of petroleum, oil, and lubricants in Sudan 50 percent lower than the regional aggregate helps maintain reasonable prices. Trucks travelling to South Sudan, however, may encounter various transport bottlenecks that increase costs. For example, one truck transporting sacks of onions from Kassala to Malakal was subject to taxes and fee payments at about 20 different locations, totaling 2,000 SDG ($800) (Yoshino 2009). Similar payments have not been reported while travelling within Sudan. Moving freight in Sudan is constrained by inadequate infrastructure and high costs. Comparing the competitiveness of Sudan s main trading artery (Port Sudan to Kosti) with Africa s best-performing corridor (the North-South corridor) reveals that there are significantly more costs and longer delays associated with moving along Sudan s arteries (figures 6 and 7). Moving freight within Sudan takes longer than moving imports from Durban to Lusaka a route across three countries that is 800 km longer. Figure 6. Moving freight within Sudan vs. moving imports from Durban to Lusaka Port Sudan- Kosti Durban-Lusaka Port Road transport Border Administrative Source: AICD calculations based on Nathan (2010); UNLJC and FAO (2005), and Yoshino (2010). Transit times can be broken down into four components: the travel times of moving goods, that is, the time of travel based on the effective velocity along each corridor; administrative time spent importing 11

19 goods to a country; port time, that is, the time taken to clear goods at ports; and border time, that is, the delays incurred in crossing borders. Transport costs are based on unit costs of moving freight along specific corridors, whereas administrative costs are based on costs involved in transporting imports into a country. Port and border delays were quantified into costs based on the assumption that delays cost $5 per day per tonne of imports. Port-related delays are the primary reason why it takes 18 days longer to move freight from Port Sudan to Kosti than from Durban to Lusaka, a route that is 800 km longer and spans three countries. The time required to move freight within Sudan does not include border-related delays Figure 7. Expense of moving freight within Sudan and across southern Africa Costs per tonne to import freight (US $) Port Sudan- Kosti Port Road transport Border Administrative Durban-Lusaka Source: AICD calculations based on Nathan (2010); UNLJC and FAO (2005), and Yoshino (2010). or customs clearance processes that imports or exports to another country would require. The main cause of the delays within Sudan are the extremely long wait times by vessels for a berth and long dwell times in Port Sudan. Durban, one of the most efficient ports in Africa, records far fewer delays. In addition to the long delays, it costs more to move freight from Port Sudan to Kosti than it does to import freight to Lusaka from Durban. The extremely high costs posed by Port Sudan are reflected in the total cost required to move freight. Moving freight within Sudan is also much more difficult than across southern Africa (table 2). It is striking that even though imported freight to Zambia is subject to various customs fees and border delays, it is still cheaper overall. 12

20 Roads Figure 8. Road quality in Sudan Source: AICD 13

21 Figure 9. Road traffic in Sudan Source: AICD. Despite the road network s expansion since the advent of the oil industry, Sudan s performance in the road sector lags regional aggregates. Between 2000 and 2008, the length of roads almost doubled from 3,400 km to over 6,200 km. The network expansion involved major arterial routes that connect Khartoum with Port Sudan and onward to Egypt (Berger Group and Doshi Borgan & Partners 2010). While these north-south links are developed and in relatively good condition, east-west connectivity lags behind (see figure 8). Sudan has extremely low road densities and poor paving rates; a significant segment of the road network is in poor condition. The classified road network in Sudan is around 30 percent the size of what is prevalent in low-income countries and resource-rich countries, and traffic volumes are extremely low. Figure 9 indicates that a bulk of the traffic is concentrated in the northeastern part of the country, mainly from Khartoum to Port Sudan and Khartoum to the Red Sea. These low traffic volumes raise questions about the extent to which roads in Sudan meet traffic thresholds that justify paving. 14

22 Table 4. Benchmarking the performance of Sudan s roads Indicator Unit Sudan Lowincome countries East Africa Middleincome countries Resource rich Classified road density km/1,000 km 2 of arable land area Paving ratio % of primary network paved Paved road traffic AADT (vehicles per day) 369 1,341 1,549 3,798 1,408 Unpaved road traffic AADT (vehicles per day) Classified network condition Percentage in good or fair condition Paved network condition % of paved roads in good or fair condition Unpaved network condition % of unpaved roads in good or fair condition Source: Derived from AICD calculations. Note: The paving ratio for Sudan is calculated based on the classified road network that is paved. The paved network condition in Sudan is based on regional and national roads in Sudan. The paved road network for Sudan does not include roads of fair quality because the length of roads with fair quality is unknown. AADT = average annual daily traffic. Table 5a. Land area in Sudan with high agricultural suitability Percent contribution to aggregate agriculture value South Sudan Sudan All parts of Sudan < 10% but high suitability 4,381 1,438 5,819 10% 50% 2,279 4,793 7,072 > 50% Total area of high agricultural suitability 6,714 6,496 13,210 Table 5b. Distribution of agricultural value within Sudan Percent contribution to aggregate agriculture value South Sudan Sudan All parts of Sudan < 10% but high suitability % 50% > 50% Total area of high agricultural suitability Source: AICD calculations. 15

23 The poor quality of roads in Sudan significantly lowers the efficiency of transport services. The poor maintenance and need for overlay in Sudan are due to inadequate funding for road maintenance and the lack of cost recovery along existing roads. The net result is a rapid deterioration of the quality of existing roads. The revenue collected by the National Highway Authority from tolls covers only 100 km of overlay and rehabilitation per year. In addition, a backlog of preventive maintenance needs has accumulated, to the extent that between 400 and 500 km of rehabilitation and overlay per year would now be required. Inadequate enforcement of restrictions on axle loads is further accelerating road deterioration (World Bank 2009a). Agricultural land is very lightly used in Sudan, in part due to inadequate roads. Sizable parts of economically productive areas in Sudan are isolated from the markets. Development of roads is a necessary precondition to exploiting the agricultural potential of Sudan. Sudan has roughly 650,000 square kilometers (km 2 ) of land (table 5a) with high agricultural potential, but 75 percent of it is farmed at only 10 to 50 percent of its capacity. Around a quarter of the land that has high suitability is farmed at only 10 percent of its capacity (tables 5a and 5b). Transport spending needs can be estimated based on the assumption that key economic nodes need to be connected. It is estimated that Sudan needs 2,900 km of road to meet regional connectivity standards (linking Khartoum to international frontiers); 5,300 km to meet national connectivity standards (linking all provincial capitals to the regional network); and a further 34,201 km to meet rural connectivity standards (linking land responsible for 80 percent of existing agricultural production value to the national network as well as linking land with the capability of producing 50 percent of the nonrealized agricultural value). In addition, the urban connectivity standard assumes an extension of the paved road network to within 500 meters of the population. Two scenarios are considered. In the base scenario, all infrastructure is maintained in good condition, and higher-end surfacing options are used (asphalt for all regional, national, and urban roads and singlesurface treatment for rural roads). In the pragmatic scenario, half the infrastructure is maintained in good condition and half in fair condition, and lower-cost surfacing options are used (single-surface treatment for national and urban roads and gravel for rural roads). An initial estimation of the connectivity needs suggests that sizable spending requirements $750 million to $1 billion are needed to reach the goals outlined in either scenario. The largest components of this total are attributed to improving conditions of existing roads and expansion of capacity. Once basic connectivity goals have been reached, an ongoing road sector maintenance budget of at least $400 million per year would be required to expand the network, and an additional $390 million would be required to sustain the network. In the pragmatic scenario, while the standards for new developments and upgrading are relaxed, emphasis on maintenance is sustained. 16

24 Table 6. Sudan s spending needs for regional, national, rural, and urban connectivity Road length in good condition (km) Mode Actual Required Basic scenario Spending needs ($ million per year over a 10-year period) Expand capacity Upgrade category Improve condition Maintenance Total As share of GDP (%) National 874 5, Regional 2,010 2, UAI 50 4, RAI 34, Total , , Pragmatic scenario National 874 5, Regional 2,010 2, UAI 50 1, RAI 34, Total 2,934 44, , Source: Adapted from Carruthers, Krishnamani, and Murray (2009). Note: RAI = Rural Accessibility Index ; UAI = Urban Accessibility Index Ports Achievements The Sudanese Port Authority (SPC) has used its large revenues to invest in infrastructure improvements at Port Sudan. The SPC revenue per ton of throughput increased by 47 percent in dollar terms between 2000 and A combination of a higher realization per tonne handled and large increases in throughput has led to the generation of substantial surpluses. Information from the mid-2000s suggests that the SPC invested around $187 million in development projects. This resulted in the main areas being in good condition with a Figure 10. Port Sudan faces serious congestion problems Ratio of current demand to reported capacity Source: AICD ports database. number of new berths added and infrastructure projects commissioned. The SPC enjoys a monopoly in its role as the country s main node for maritime trade, and its revenues appear high relative to the number of ships using the port and the volume of cargo it handles (World Bank 2008). 150% 125% 100% 75% 50% 25% 0% Cotonou Cape Town Luanda Port Sudan Douala Dar es Salaam Mombasa 17

25 Challenges Port Sudan remains one of the most inefficient ports in Africa. Compared to regional benchmarks, container dwell time at Port Sudan is over four times that of global best practices and among the worst in Sub-Saharan Africa. Truck cycle times for receipt and delivery of cargo at Port Sudan are 24 times higher than global benchmarks, and crane productivity is less than a third of what is observed in several parts of Africa. The handling charges at Port Sudan are at the lower end of what is charged in other African ports, but the inefficiencies present a huge deterrent to increased usage of the port (table 7). Table 7. Benchmarking Port Sudan s performance Performance Port Sudan Mombasa Dar es Salaam Southern Africa West Africa Global best practice Container dwell time (days) <7 Truck processing time (hours) Crane productivity (containers per hour) Crane productivity (tonnes per hour) >30 Charges Container handling ($ per TEU) General-cargo handling ($ per tonne) Container handling ($ per TEU) Source: AICD ports database. Note: TEU = 20-foot equivalent unit. A steady increase in containers handled at Port Sudan has created serious port congestion problems, adding significant delays to the movement of freight. Several of the region s ports are beginning to experience serious capacity constraints (figure 10) due to burgeoning demand associated with increases in container traffic and dry-bulk cargo. Port Sudan in particular is already operating at 80 percent capacity at least, a level of intensity that creates problems in terms of congestion. There is some scope for easing capacity constraints by improving the efficiency of port performance, although ultimately new investments will be needed (see figure 10). Labor requirements at the port lead to overstaffing, poor productivity, and higher costs. In the North Port, the equivalent of a dock labor board exists and there is a legal requirement to use labor from a pool of 25,000 workers. In the container terminal, the SPC provides the labor and acknowledges that it is overstaffed by 7,300 workers (World Bank 2008). 18

26 Air transport Figure 11. Khartoum is the main airport in Sudan Source: AICD. Achievements Sudan s per capita airline seat capacity is higher than that of most of its neighbors, excluding Kenya and Egypt (which have their own exceptionally strong national carriers). Sudan has developed a strong international gateway for air transport in Khartoum. Overall traffic in Sudan has risen, largely driven by intercontinental traffic. Consistent with the rest of Africa, the overall size of the aircraft flown has decreased from wide-body to single-aisle jets. 19

27 Growth in seats for travel between Sudan and South Sudan tripled between 2001 and The Diio SRS shows that in 2007, while there were 219,741 seats for travel within Sudan, there were only 696 seats advertised for South Sudan (table 8) These figures may mask the fact that traffic between the two regions has actually grown rather significantly from 24,452 seats in 2001 to 87,191 in How much of that traffic is hub traffic through Khartoum traveling between points in South Sudan is not known. Table 8. Benchmarking air transport indicators for Sudan and select other countries 4 Country Sudan Ethiopia Chad CAR Kenya Egypt Traffic (2007) Domestic travel ( 000 seats per year, excluding south) n.a. n.a. 2,093 5,959 International travel within Africa ( 000 seats per year) 302 1, ,145 1,886 Intercontinental travel ( 000 seats per year) 2,052 2, ,755 15,793 Seats available per 100 people Herfindahl-Hirschmann Index air transport market (%) Quality Percent of seat-km in newer aircraft Percent of seat-km in medium or smaller aircraft Percent of carriers passing IATA/IOSA audit FAA/IASA audit status No audit Passed No audit 0 0 Passed Source: Bofinger Note: The Herfindahl-Hirschmann Index (HHI) is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. A HHI of 100 indicates the market is a monopoly; the lower the HHI, the more diluted the market power exerted by one company/agent. FAA = U.S. Federal Aviation Administration; IASA = International Aviation Safety Assessment; IATA = International Air Transport Association; IOSA = IATA International Safety Audit; CAR = Central African Republic. n.a. = Not applicable. Challenges Existing air connectivity in Sudan is largely oriented toward the Middle East and Egypt. Addis Ababa (Ethiopia) is used as the main connecting point to transit to the rest of Africa, while Sudan has, for example, no direct flights from Khartoum to Kampala (table 9). There is a lack of regulatory oversight in the air transport sector. A number of small, domestic carriers, registered generally as charter airlines, are operational. These operators may act as scheduled carriers, but do not report information to a booking or ticket sales agency. Often such operators in countries with poor oversight pose an air safety problem as they operate aircraft maintained on minimal budgets, with maintenance crew and pilots whose skills may not be consistent with international standards. The percentage of seats in Sudan flown on newer aircraft is smaller than its neighbors, creating additional safety risks. 4 All data are as of 2007 based on estimations and computations of scheduled advertised seats, as published by the Diio SRS Analyzer. This captures 98 percent of worldwide traffic, but a percentage of African traffic is not captured by these data. 20

28 Table 9. Origin destination matrix Sudan Bahrain Egypt Eritrea Ethiopia Germany Jordan Kenya Lebanon Bahrain 10 Egypt 38 Eritrea 1 Ethiopia 10 Germany 4 Jordan 6 Kenya 14 Lebanon 3 Libya 2 Netherlands 3 Sudan Qatar 14 Saudi Arabia 17 Syrian Arab Republic 4 Turkey 7 United Arab Emirates 29 United Kingdom 3 Yemen 2 Source: Bofinger Libya Netherlands Sudan Qatar Saudi Arabia Syrian Arab Republic Turkey United Arab Emirates United Kingdom Yemen 21

29 Figure 12. Evolution of seats and city pairs in Sudan a. Seats b. City pairs Number of seats 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 City pairs ,001 2,004 2, (Est) Total International Intercontinental excluding flights between NA and SSA Between North and South Domestic 0 2,001 2,004 2, (Est) Total International Intercontinental Between North and South Source: Bofinger Derived from AICD national database ( Note: As reported to international reservation systems. NA = North Africa; SSA = Sub-Saharan Africa. Water supply and sanitation Challenges Around 85 percent of Sudan s populace lacks access to safe sources of water (figure 13). Over 25 percent of the population relies on surface water and almost 60 percent relies on wells and boreholes. Sudan s reliance on wells and boreholes for water supply is higher than for any other country in its peer groups and is becoming a challenge for the country. Fewer than half the wells and boreholes in Africa provide safe water (table 10). Sanitation access in Sudan is bimodal. On the one hand, 40 percent of the population has access to improved latrines; on the other, 40 percent continues to practice open defecation. Both ratios are substantially higher than for the relevant resource-rich and low-income African peer groups. In contrast to these peers, reliance on flush toilets and traditional latrines is much more limited. A very small share of the population 15 percent has access to utility water, well below all other African benchmarks. Available information suggests that there is almost no access to piped water, and stand posts are the only form of utility water that is accessed. Census data for all parts of Sudan indicate that in 1993 about 60 percent of the population had access to utility water but there has been a steep decline in access rates down to 35 percent in the 2000s. Since access to utility water is negligible in South Sudan, the access data for all parts of Sudan reported in the census relates primarily to Sudan itself. 22

30 The precarious decline in access has been attributed to a lack of maintenance of water supply assets that has led to their gradual dilapidation. Figure 13. Water resources in Sudan Source: AICD Table 10. Benchmarking water and sanitation indicators in Sudan 5 Unit Sudan Resource-rich countries Low-income countries Middle-income countries 2009 Mid-2000s Mid-2000s Mid-2000s Access to piped water % pop Access to stand posts % pop Access to wells/boreholes % pop Access to surface water % pop Access to flush toilets/septic tanks % pop Access to improved latrines % pop Access to traditional latrines % pop The AICD used the March 2010 Joint Monitoring Data (JMP) coverage statistics as the main source of access data on water supply and sanitation, and processed it under a standardized methodology to allow cross-country comparisons. The AICD calculations might differ from the access rates reported by governments. 23

31 Unit Sudan Resource-rich countries Low-income countries Middle-income countries 2009 Mid-2000s Mid-2000s Mid-2000s Open defecation % pop Mid-2000s Mid-2000s Mid-2000s Domestic water consumption liter/capita/day Revenue collection % sales Distribution losses % production Cost recovery % total costs Operating-cost recovery % operating costs Labor productivity connections per employee Total hidden costs % of revenue Scarce water resources Sudan Other developing regions Average effective tariff U.S. cents per m Source: Demographic and Health Survey (DHS) and AICD water and sanitation utilities database ( Access figures calculated by the AICD based on the 2000 and 2006 DHS figures published by the Joint Monitoring Program (WHO 2010). = Not available. Only 40 percent of urban dwellers rely on advanced water technologies for their water supply. Close to 40 percent of the population has access to utility water mainly stand posts in urban areas, and around 5 percent in rural areas. Almost 70 percent of rural Sudanese rely on wells and boreholes, 30 percent higher than in urban areas. It is very striking that there is little difference in the reliance on surface water around 25 percent of both rural and urban Sudanese obtain their water from open sources. Figure 14. Limited access to advanced water technologies in urban Sudan % population There is significantly greater usage of improved sanitation technology types in urban Urban Rural areas (figure 14). Urban areas have twice the level of access to flush toilets or improved Source: Access figures calculated by AICD using data 2009 DHS data. latrines compared to rural areas. In the case of flush toilets, the access rate in urban areas is 14 percent compared to 1 percent in rural areas. Sixty percent of the urban population relies on improved latrines compared to 32 percent of the population in rural areas (figure 15). Some 68 percent of the rural population defecate in the open compared to 12 percent of urban dwellers. Deep boreholes and hand pumps are the predominant technology used for water supply in the poorer households, and water filters (improved sources of water) are the water supply modalities in wealthier households. Around 41 percent of the poorest quintile of households derive their water from wells and 24

32 boreholes, while 12 percent of the wealthiest quintile of households rely on water from wells and boreholes. Lower-income Sudanese use lower-end sanitation technologies. Around 54 percent of the poorest quintile of the population defecates in the open compared to 13 percent of the richest quintile. While none of the poorest quintile of the population uses flush toilets, almost 20 percent of the richest quintile do so. The most dominant sanitation technology across the board is pit toilets. Disparities are less glaring in the use of pit toilets around 42 percent of the poorest quintile of the population and 56 percent of the richest quintile of the population use them. Figure 15. Sanitation access is largely bimodal % population The KWC s poor performance, particularly Urban Rural due to inadequate collection of bills and network Source: Access figures calculated by AICD using data 2009 DHS data. losses, also holds back service expansion. The KWC fares poorly when its performance is compared to regional benchmarks. Nonrevenue water, at 40 percent of production, is twice that of a well-performing utility. At 90 connections per employee, labor productivity is less than half the average productivity of a utility in middle-income countries, which is 200 connections per employee. On average, Sudan s water utilities recover only 62 percent of the total billing, which is comparable to the revenue collection of utilities in resource-rich countries, but is a very poor track record in absolute terms. Finally, cost-recovery tariffs are not in place, creating a constant financial drain. The poor performance can be quantified as a percentage of revenue, giving a sense of the hidden costs attached to such inefficiencies. Sufficient data were available to quantify these hidden costs for the KWC as well for one other provincial utility in Sudan: the South Darfur Water Corporation. The KWC emerges at the more inefficient of the two. Overall, the utilities lose between 80 and 120 percent of their revenues. The main drivers of these losses are collection inefficiencies, followed by distributional losses. The inefficiencies in Sudan s utilities are slightly lower than several East African countries (Kenya and Ethiopia) that lose up to 150 percent of their revenues due to hidden costs (figure 16), but are still very high in absolute terms, amounting to $73 million a year. 25

33 Figure 16. Hidden costs of selected water utilities, as percentage of revenue Khartoum Water Corporation South Darfur Water Corporation Kenya Ethiopia Sudan (Average 2005) Tanzania Uganda Losses Underpricing Collection Inefficiencies Percentage of revenues Source: Derived from Briceño-Garmendia, Smits, and Foster (2009). The valuation of these hidden costs helps identify the individual challenges faced by Sudanese utilities. Collection inefficiencies are leading concerns for the South Darfur Water Corporation and the Khartoum Water Corporation. The underlying observable performance indicators are presented in table 11. Table 11. Operational indicators for water utilities in Sudan, 2005 Utility Water delivered (million m 3 /year) System losses (%) Collection ratio (%) Average total cost ($/m 3 ) Average effective tariff ($/m 3 ) Total hidden costs ($ million/year) Total hidden costs (% revenues ) Khartoum Water Corp South Darfur Water Corp Source: Derived from Briceño-Garmendia, Smits, and Foster (2009). Note: For Sudan water delivered (million m 3 /year) and total hidden costs ($/year) are reported as the sum of the utilities; the other indicators are calculated as weighted averages. Average total cost per cubic meter was calculated assuming a unit capital cost of 40 cents. 26

34 Energy Figure 17. Power infrastructure in Sudan Source: AICD. 27

35 Achievements Installed electricity generation capacity in Sudan tripled between 2005 and Sudan s installed capacity increased from 801 MW (AICD 2005) in 2005 to around 2,687 MW in 2009 (Platts 2009). 6 Compared to its African peers, Sudan s installed capacity far exceeds what lowincome countries have put in place but lags behind that of resource-rich countries. In 2005 around 70 percent of the electricity was generated via thermal generation and around 20 percent using hydropower resources. But the composition mix seems to have changed since 2005; with the construction of new hydropower plants, the generation mix has now shifted to 55 percent hydropower and 45 percent thermal. Table 12. Relatively high usage of modern fuels for cooking in Sudan Usage of modern fuels All households Richest households Sudan (2009) Kenya (2003) Nigeria (2003) Uganda (2001) Ethiopia (2005) South Sudan (2009) Tanzania (2005) Source: World Bank 2010b and c DHS various years. The National Energy Corporation (NEC) enjoys healthy bill collection. The utility reports that all of the billings are routinely collected by the utility. These rates are higher than all other African peer groups (table 13). Sudan boasts a relatively high use of modern fuels (gas and electricity) for cooking relative to its African peers. Around 36 percent of Sudan s population uses modern fuels for cooking compared to 1 percent of resource-rich Nigeria s population. Over 65 percent of Sudan s richest quintile use modern fuels for cooking relative to 6 percent in Nigeria and 16 percent in Kenya (see table 12). Even 8 percent of the poorest quintile of the population used modern fuels. Challenges Electricity access rates, at around 37 percent of the population, are still low relative to most of Sudan s resource-rich peers. The figure is more or less comparable to that of African low-income countries, however. Over 52 percent of urban areas have access to electricity compared to 28 percent of rural areas. Rural electrification is broadly comparable with other parts of Africa, but urban electrification lags significantly. There is a difference of over 25 percentage points between access to power in urban areas in Sudan and in other resource-rich countries in Africa. Inadequate power access retards business activity, with the challenge being more acute in some areas than others. Though firms reporting that power is not widely available varied from 25 to 60 percent, state to state, across all states firms identified power to be a major problem. This challenge is particularly acute in the Nyala region, where around 60 percent of firms say inadequate power constrains business activity (figure 18a). Power outages in Sudan, at 19 days per year, greatly impact productive activity and exceed those found among the country s resource-rich and low-income peers. 6 Based on the estimate that around 97 percent of all parts of Sudan s power is in Sudan. 28

36 Table 13. Benchmarking power indicators in Sudan Indicators Units Sudan Low-income, nonfragile countries Middleincome countries Resourcerich countries Access to electricity (national) % of population Access to electricity (urban) % of population Access to electricity (rural) % of population Installed generation capacity MW 2, ,971 4,105 Installed generation capacity per million population MW per million population Power outages Days/year Firms that find power a constraint for business % of firms Firms with own generator % of firms Collection rate % billing Revenue per unit US cents/ kwh System losses % of generation Effective power tariff Sudan Predominantly hydro Other countries Residential at 100 kwh US cents/kwh Commercial at 100 kwh US cents/kwh Industrial at 50,000 kwh US cents/kwh Average effective tariff US cents/kwh Source: All data unless specified are for 2005 and based on AICD calculations; data for access to electricity for Sudan are from 2009 and were obtained from the US Energy Information Administration (EIA); data for South Sudan access to electricity are from 2010 and were obtained from World Bank (2011); data for installed capacity for Sudan are from 2009 and were obtained from Platts (2009); data for power outages ere derived from Vennemo and Rosnes (2009); data for Emergency Generation from Eberhard and others (2008); data for firms that find power to be a constraint and firms with own generators are from 2007 and were obtained from World Bank (2009b); data on Sudan collection rate, revenue per unit, and system losses are for 2004 and were taken from World Bank (2007); data for average effective tariff for Sudan are for 2004 and taken from World Bank (2007); data for average effective tariff for South Sudan are taken from World Bank (2011). For the thermal benchmark, data represent primarily residential users. Note: Access to electricity data for Sudan are estimates based on calculations from the AICD economic model for power investment needs. Installed capacity per million population was calculated based on Platts (2009) estimates for installed capacity. * The aggregate is based on manufacturing firms. Excessive reliance on generators to cope with erratic and unreliable power supply increases production costs and reduces competitiveness. A significant share of manufacturing enterprises (from 36 percent in North Kordofan to 96 percent in Red Sea) share or own generators. The share of electricity consumption produced by generators in these states was 66 percent and 72 percent, respectively. Apart from increasing costs and reducing competitiveness, investment in these generators also holds up a significant amount of resources that could have been used for other fixed assets or to lower working capital constraints of most of the businesses (World Bank 2009b). Given erratic supply and high reliance on backup generators, industrial and commercial consumers account for only around 30 percent of electric utility consumption (figure 19). Consumption of power for agricultural uses is around 5 percent, and the rest of the consumption is primarily by domestic consumers. In contrast, billing patterns (as a proxy for consumption) in South Africa suggest that industrial and commercial consumers account for 92 percent of all billings, and residential consumers for only 8 percent. 29

37 Figure 18a. Electricity is the largest obstacle to doing business in Sudan Figure 18b. High reliance on generators for power Perception that electricity is the biggest onstable to doing business (% of firms) Gazira Khartoum River Nile North Kordofan Red Sea Nyala North Kordofan river Nile Khartoum Gezira Nyala Red Sea % of firms that own generator % of power from generator Source: Derived from World Bank (2009b). Figure 19. A small share of Sudan s power consumption is for industrial activities Source: Based on statistical handbooks produced by the Central Bureau of Statistics and on data reported by the NEC, which are assumed to reflect the situation in Sudan. Power prices are toward the lower-middle end of the range observed in Sub-Saharan Africa. At $0.09 per kilowatt-hour (kwh), the price is close to the average of countries predominantly reliant on hydropower. Nevertheless, given that thermal power has been dominant until quite recently and continues to play a significant role, tariffs look low relative to historic costs of around $0.19/kWh (figure 20). The costs of producing power are marginally higher than the average cost of power production in Africa. The average power production cost in Sudan, at $0.19/kWh, is slightly more than that of Sub- Saharan Africa s, which is around $0.18/kWh (figure 21). The costs are partially offset by generous government subsidies to the power utility. In 2003 and 2004 the government of Sudan provided subsidies valued at around $60 million. While there are no data available for later years, it is believed that the power utility continues to receive these subsides from the government. The end user ultimately pays less than half of what it costs to produce the power. 30

38 Figure 20. Moderate power tariffs in Sudan US cents per KWh Liberia Chad Burkina Faso South Sudan Cape Verde Senegal Mali Uganda Kenya Congo, Rep. Rwanda Benin Niger Cote d'ivoire Namibia Madagascar Cameroon North Sudan Ghana Botswana Mozambique Lesotho Tanzania South Africa Ethiopia Zimbabwe Nigeria Malawi DRC Zambia Source: Briceño-Garmendia and Shkaratan 2009; World Bank 2007; World Bank Note: South Sudan s price is the median of its price range of cents. DRC = Democratic Republic of Congo. Figure 21. Benchmarking historic power production costs in Sudan Mali Niger Sierra Leone ( ) Congo Benin North Sudan Cape Verde Cameroon Rwanda Sierra Leone 2009/10 Burkina Faso Madagascar Kenya Tanzania Chad Ghana Senegal Namibia Cote d'ivoire Lesotho Mozambique Uganda Zimbabwe Nigeria Malawi Ethiopia DRC Zambia South Africa Botswana Source: Briceño-Garmendia and Shkaratan 2009; World Bank 2007; World Bank Note: DRC = Democratic Republic of Congo. In spite of the generous subsidies received from the government, the NEC reported large financial losses. The utility lost $12 million each year in 2003 and 2004, $0.02 $0.03 per unit of electricity sold. Even the 10 percent increase in power sales from the previous year did not stabilize the financial performance of the NEC. Hidden costs diverted significant resources from the utility, causing economic losses of almost $500 million ($484 million) in 2008 Underpricing is one major problem the $0.09 per kilowatt-hour tariff recovers only 50 percent of the $0.18 required to produce a kilowatt-hour. Despite subsidization, this underpricing added almost $380 million to the NEC s 2008 losses. Network losses were around 22 percent in Though generally consistent with what most African utilities encounter, losses of this magnitude are double international best-practice standards. Network losses contributed $106 million to the NEC s 2008 financial losses (table 14). 31

39 Table 14. Operational indicators for the NEC System Implicit Average total Average Total hidden Total hidden Net generation losses collection ratio cost effective tariff costs costs (GWh/year) (%) (%) ($/kwh) ($/kwh) ($ million/year) (% revenues) , , , _ , , , Source: AICD analysis based on World Bank (2007) and Sudan Central Bureau of Statistical Handbooks. = Not available. Some progress has been made, however. Hidden costs as a share of utility revenue fell substantially from 175 percent of NEC s revenues in 2003 to 96 percent in 2008 (figure 22). This is largely attributable to significant reduction in network losses, which were as high as 35 percent in 2003 but were reduced to 22 percent by While tariffs have risen slightly, they have not kept pace with the rising costs of production Nevertheless, a 60 percent expansion of power production all sold at a loss, has inflated absolute hidden costs from $306 million in 2003 to $484 million in 2008 Expressed in terms of the size of the economy, these hidden costs shaved off 2.2 percent of GDP in 2003, falling to 1.5 percent of GDP in Figure 22. Large hidden costs at the NEC due to underpricing and unaccounted losses Source: Derived from Briceño-Garmendia, Smits, and Foster (2009) using data from World Bank (2007) and Sudan Central Bureau of Statistics handbooks. The NEC s hidden costs look high when compared to that of other African utilities (figure 23). They represent about 100 percent of the NEC s revenues and are double that of the top-performing countries such as Senegal, Côte d Ivoire, and Benin. Nevertheless, they are far from being the worst in Africa. 32

40 SUDAN S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Figure 23. Hidden costs are high in Sudan relative to other African countries 300 Percentage of revenues Nigeria South Sudan Liberia Niger Mali Ghana Sudan Burkina Faso Cote d'ivoire Benin Cape Verde Senegal South Africa Collection Inefficiencies Underpricing Losses Source: Derived from Briceño-Garmendia, Smits, and Foster (2009); Sudan Central Bureau of Statistics handbooks. In the long run, Sudan s power cost-recovery situation looks a little more promising, particularly if the nation s hydropower potential is developed. Using a model that simulates optimal (least-cost) strategies for generating, transmitting, and distributing electricity in response to demand increases, it is estimated that the long-run marginal costs of producing power in Sudan would be about $0.13/kWh when all cost-effective power strategies are fully developed. Although this is well below the historic cost of around $0.19/kWh, it is still significantly above the current tariff of $0.09/kWh. Thus, there is a need to continue raising the tariff toward these long-term equilibrium levels (figure 24). Figure 24. Existing tariffs for power are insufficient to recover huge operating costs and long-run marginal costs Existing total cost Long run - marginal Cost Existing operating cost Effective tariff Average revenue Existing capital cost Source: AICD calculations. Sudan s rich endowment of hydropower resources could make it a significant exporter of hydropower in the Nile Basin region. To meet its potential, Sudan would need to develop more than 3,100 MW of hydropower capacity beyond its domestic needs, which would represent a doubling of capacity. The nation would also need to develop around 13,500 MW of interconnector capacity, the largest of any country in the region. 33

41 Deepening power trade would save the Eastern Africa Power Pool Nile Basin (EAPP-NB) around $1 billion in energy costs. Even though Sudan and Ethiopia have to make the lion s share of the investments, these will offset the high costs of thermal generation, which is currently the main source of generation in the EAPP. Expanding capacity and investing in interconnectors will allow Sudan to gain a substantial 12 percent per year return on the investment. Moreover, by increasing the share of hydropower in the regional generation portfolio, the region could save several million tonnes of carbon emissions a year. Under trade expansion, Sudan s weight of hydropower increased from 73 to 87 percent, making the generation of power less carbon intensive. Information and communication technology Figure 25. Sudan s ICT backbone infrastructure as of the mid-2000s Source: AICD. Note: The figure captures the situation in Sudan in the mid-2000s, when the mobile signal coverage was not as high. Today, this situation has significantly improved. 34

42 Achievements All parts of Sudan have made impressive progress in the ICT sector since the early 2000s, placing access and service penetration rates on par with African peers. In the early 2000s, only around 60 percent of the population was covered by a GSM 7 signal. As of 2010, over 80 percent of the population is covered by a GSM signal. Mobile subscription rates have risen from less than 1 percent in 2000 to 33 percent in Growth in mobile telephony has been impressive and Sudan s is among the most rapidly growing in Africa. Until recently, most of the development in the sector was in the northern part of Sudan.Only a few other countries in East Africa Kenya, Tanzania, and Uganda have achieved mobile penetration of around 20 percent or more. Internet penetration has also grown significantly but slightly lags behind resource-rich and middle-income African countries. International bandwidth in all parts of Sudan has grown exponentially and exceeds all benchmarks except middle-income countries. The landline sector has not demonstrated much growth, meanwhile, in part because of an overwhelming preference for mobile phones. This trend is broadly consistent across Africa as a whole. Table 15. All parts of Sudan compare favorably to the average African country in terms of ICT access and prices Indicator Access GSM coverage Unit % population under signal All parts of Sudan Resourcerich countries Lowincome countries Middleincome countries Sub- Saharan Africa International bandwidth Bits/person Internet Users/100 people Landline Subscribers/100 people Mobile phone Subscribers/100 people Prices Price of monthly mobile basket US $ Price of monthly fixed-line basket US $ Price of monthly fixed broadband US $ Price of a call to the United States per minute US $ Price of an inter-africa call per minute US $ Source: Adapted from Minges and others 2009 using data from the Central Bureau of Statistics, Sudatel, Zain, and World Bank ICT At-a- Glance. Source: Data for landline subscribers is for 2005 taken from the Central Bureau of Statistics, South Sudan; Mobile phone subscriptions based on World Bank staff estimates for 2011; Note: Landline and mobile subscriber data are based on information from Sudan; the others are based on Sudan aggregates. These are representative of Sudan because until recently South Sudan did not have access to adequate ICT services. Most of the ICT connectivity existed only in Sudan. Analysis of 2006 data for all parts of Sudan suggests that almost 98 percent of the population could access mobile telephony on a commercially viable basis (figure 26). This result is based on the assumption that 4 percent of local income in each area could be captured as revenue for voice telephony 7 Global system for mobile communications. 35

43 services. The gap in universal access to telephony can be closed relatively easily for Sudan on a commercial basis. A small subsidy could aid in reaching the uncovered 2 percent of the population. For broadband infrastructure, simulations present an optimistic picture. Around 96 percent of all parts of Sudan s population could gain access to limited performance WIMAX 8 broadband infrastructure on a commercially viable basis. A gap of 3 to 4 percent exists in the northwest region of all parts of Sudan primarily a desert and in the south (figure 27) Figure 26. A small subsidy could have closed the mobile telephony coverage gap in all parts of Sudan 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% South Africa Nigeria Ghana Benin Côte d Ivoire Senegal Sudan Percent of population Malawi Burkina Faso Cameroon Ethiopia Tanzania Lesotho Mali Chad Niger Madagascar Congo-DRC Source: Mayer and others Existing access Efficient Market Gap Coverage gap The advent of undersea fiber-optic cables has enabled Sudan to develop a strong ICT infrastructure backbone (figure 26). Three undersea cable systems land in Port Sudan: SAS-1 (providing a direct link to Saudi Arabia), Flag Falcon, and, most recently, the Eastern Africa Submarine Cable System (EASSy). In addition, there are terrestrial links to Egypt and Ethiopia and a 10,000 km domestic fiber backbone (Sudatel 2009). The EASSy has established a landing station in Sudan. Significant private investment has facilitated Sudan s fiber-optic connectivity. Sudan needs to establish overland connections to the cable to complete the national ICT backbone The emergence of competition in gateways as a result of connectivity to the undersea cable has facilitated very attractive prices for ICT services in Sudan among the most attractive in Sub-Saharan Africa. Sudan pays a third of what resource-rich countries pay and a fourth of what low-income countries pay for the mobile basket. Landline telephony, which has not experienced any growth, has also seen its prices slashed. But prices for fixed broadband are the most striking. In 2005 all parts of Sudan paid 10 percent of what resource-rich countries paid for their ICT services and 8 percent of what low-income countries paid (table 15). 8 Worldwide interoperability for microwave access. 36

44 Figure 27. The voice telephony gap could easily have been filled in Sudan Source: Mayer and others Evidence from Sub-Saharan Africa suggests that access to the submarine cable has generally reduced costs of ICT services when international gateways are present (table 16). Sudan has established competition in its international data gateways and partial competition in its international long-distance gateway. The pricing of ICT services, particularly Internet-access prices, reflects the emergence of competitive gateways (table 15). Prices to call within the region are consistent with those of other countries that have established competition in international long distance, and are half what resource-rich and low-income countries pay in general. Prices to call the United States are half what low-income and resource-rich countries pay on average (table 15), but are double those of countries that have established competitive gateways (table 16). Table 16. Prices of Internet and phone calls in Sub-Saharan Africa, with and without access to submarine cables $ Call within region Call to the United States Internet dial-up Internet ADSL Without submarine cable With submarine cable Monopoly on international gateway Competitive international gateway Source: AICD calculations. Note: ADSL = asymmetric digital subscriber line. Sudan has made impressive strides in liberalizing its ICT markets and now boasts one of the most liberalized markets in Africa. The original National Telecommunication Authority has been dissected into two core competencies. The National Telecommunication Corporation (NTC), the industry regulator, was established in 2001 and took on the function of regulation and supervision. The provision of ICT services was licensed to private operators. One operator, Sudatel, was established in 1994 as a public company and subsequently floated on the regional stock market. The government owns around 21 percent of the 37